Balancing Work and Family: The Economic Effects of Earned Paid Sick Time

By Nicole Rodriguez, September 15, 2014

EPST Fact Sheet 9-14-14

Many
workers are responsible for caring for a family. They face daily
challenges of being both good parents and hard-working, effective
employees. In recent decades, more and more children are growing up in
families where all the adults work. Yet, some of our employment
policies do not reflect this modern reality. This brief examines
challenges faced by working families and the role that earned paid sick
time can play in helping families meet those challenges. It also
describes the effect of such laws on businesses and the broader economy.

Balancing
Work and Family

Nearly all workers experience family illness, personal health issues,
or the need to care for a sick child. Yet, many workers, particularly
low-wage workers, lack family-friendly protections like earned paid
sick time, which requires employers to offer earned paid time off in
order to address a health issue. (See Earned
Paid Sick Time –
Frequently Asked Questions)

Changes in the U.S. labor force have increased the need for
family-friendly policies because time available for caregiving has
decreased. For instance, women have entered the labor force in growing
numbers and families find themselves relying on more than one wage
earner to get by.1
In fact, fewer children are living in households where there is a
nonworking parent — a decline from 64 to 34 percent between
1967 and 2009.2
Combined with growing child care concerns, many workers
have elder care responsibilities.3
The number of households
with both kids under 18 and adults over 64 continue to rise.4
This trend will likely increase as millions of baby boomers enter
retirement.5

Economic
Effects of Earned Paid Sick Time on
Families

About 1 in 3 workers in Massachusetts do not have access to earned paid
sick time.6
This lack of protection can lead to job loss and
delayed career advancement.7
For many individuals, the early
years of careers coincide with the years in which they start their
families, when family responsibilities are often the most
demanding.8
This is particularly significant for low-income
working women, since they are often the primary caregiver, and have
fewer resources to help manage work and family.

In order to better address the struggle of balancing work and family
and level the employment playing field, several cities and states have
recently passed earned paid sick time laws and many more are
considering these proposals. Earned paid sick time gives employees the
right to earn paid time off in order to address pressing health issues.
These policies have been found to support workers in a few important
ways:

Allows
families to meet basic
needs. Many families living
paycheck to paycheck rely on a tight family
budget to make ends meet. When a worker, particularly a low-wage
worker, or their child, becomes ill and has to take time off, lost
wages can become a critical shortfall in that budget. For example, 3.5
days of lost pay is equivalent to an average low-income
family’s monthly grocery budget.9

Increases long-term
employment
and earnings prospects.
Workers who do not earn sick time are at risk
of losing their jobs when they need to care for themselves or their
family members, which imposes costs to their long-term economic
stability.10
The added economic security provided by earned
paid sick time is especially important in an economy where long-term
unemployment rates are still stubbornly high.11
As of July
2014, the average duration of unemployment was about 31 weeks.12

Prevents unnecessary
health
care expenses. Without access
to earned paid sick time, families are
more likely to send their child to school sick and/or seek medical
treatment at an emergency room because they could not get the
time off
during normal business hours, when most doctors’ offices are
open.13
Providing earned paid sick time can reduce emergency
room visits and other medical expenses since it makes it easier for
families to get primary and preventive care.14
Also, it can
prevent the costs of delaying health services, such as from untreated
illnesses, and future costs associated with long-term
illnesses.15
In Connecticut, which has a statewide earned paid
sick time law, nearly 20 percent of employers reported that they had
fewer sick employees show up to work and saw about a 15 percent
reduction in the spread of illnesses as a result of the law.16

Economic
Effects of Earned Paid Sick Time on
the Economy

In addition to working families, businesses are important stakeholders
in the earned paid sick time debate. Some opponents of earned paid sick
time express concerns that such laws could have negative economic
effects. One way to examine those issues is to look at data from two
cities, San Francisco and Washington D.C., which have the longest
standing earned paid sick time laws in the country (San Francisco in
2007, and D.C. in 2008). The following graphs look at general economic
trends and do not prove causation. We also do not control for other
factors, such as barriers to enforcement and compliance. However, if
there were significant negative effects, it is likely that they would
have shown up in the following data.

Effects
on Wages

The data from San Francisco and D.C. do not suggest that earned paid
sick time policies adversely affect wage growth. Overall wage growth
has been stronger in San Francisco and Washington D.C. than in the U.S.
since these laws have passed.

Similarly, we find no overwhelming evidence of adverse effects on job
growth in cities with earned paid sick time. Specifically, San
Francisco and Washington D.C. are currently experiencing faster job
growth as compared to the U.S. On the whole, cities with earned paid
sick time policies have higher job growth, compared to surrounding
counties.17

Additionally, we find no overwhelming evidence that earned paid sick
time laws have discouraged the formation of new business
establishments. San Francisco and Washington D.C. has experienced
higher business growth between 2008-2012 as compared to the U.S. In
fact, San Francisco County has had more growth than its neighboring
counties, particularly in the industries that were previously least
likely to offer earned paid sick time, such as retail and food
service.18
Similarly, a 2013 audit of Washington
D.C.’s earned paid sick law found no evidence that the law
discouraged owners from establishing new businesses.19

There are some costs and savings associated with earned paid sick time
policies. Specifically, providing earned paid sick time to employees
who do not have this benefit will likely increase compensation costs
for employers. In 2013, the cost of earned paid sick time for all
businesses in the U.S. averaged 0.9 percent of total employee
compensation for both the U.S. and New England.20
For
restaurants and other service companies, where low-wage jobs are
concentrated, the average cost was even lower -- 0.5 percent. This low
percentage is likely due to some employers not providing earned paid
sick time.21
However, employers from San Francisco and
Washington D.C., which both have earned paid sick time laws, report
that costs are minimal.22
Specifically, the majority of small
businesses in San Francisco surveyed reported that they did not make
any changes following implementation. Similarly, businesses in Seattle,
which implemented its own citywide earned paid sick law in 2012, found
costs to be modest and smaller than expected.23

Earned paid sick time can lead to healthier workplaces, reduced
turnover, and more satisfied and productive workers, all of which
translate to better bottom lines.24
For instance, the costs of
replacing an employee earning $30,000 or less (more than half of the
U.S. workforce) are on average 16 percent of their salary.25
Overall, when workers feel supported by their companies, they are
happier with their jobs, more loyal to their employers, and have a
bigger commitment to their company’s success.26

Additionally, evidence shows that most workers use sick leave only when
necessary. For example, a majority of employers (86 percent) surveyed
in Connecticut, where there is a statewide earned paid sick leave law,
reported no known cases of abuse and found that most workers did not
use the entire lot of sick days earned.27
Employers in San
Francisco and Seattle reported similar findings.28
Workers who
have access to earned paid sick time use about 4 days per year for
illness and about 1.3 days to care for sick family members.29
However, workers vary in their need for paid sick time. Half of workers
with access to earned paid sick time do not use a single day, whereas
others need about a week, in some years.30

Finally, research finds that employees without earned paid sick time
are more likely to come to work ill, which increases the risk of
accidents, spreading illness to co-workers, driving up health care
insurance costs, and decreasing productivity overall, all of which cost
employers money.31
In fact, the cost of people coming into work
sick in the U.S. is estimated at $160 billion each year.32

This
research was funded in
part by the Annie E. Casey Foundation. We thank them for their support
but
acknowledge that the findings and conclusions presented in this report
are
those of MassBudget alone, and do not necessarily reflect the opinions
of the
Foundation.

This research was funded in part by the Annie E. Casey Foundation. We thank them for their support but acknowledge that the findings and conclusions presented in this report are those of MassBudget alone, and do not necessarily reflect the opinions of the Foundation.

Massachusetts Budget and Policy Center

1 State Street, Suite 1250 | Boston, MA 02109 | (617) 426-1228

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